Mortgage holders forced to pay up or sell up

Halifax Pile Extra Pressure on Mortgage Holders

07-April-2008, Writes Dan Drage dan.drage@consumerchoices.co.uk

Halifax, one of the UK’s biggest lenders, will raise mortgage rates and alter its mortgage acceptance policy today.

The high street lender has announced a 0.35% raise in mortgage rates starting today, and a twist in acceptance criteria that will now see those who cannot afford a substantial deposit pay punishing rates.

This latest rate rise bookends a tumultuous week for the lending industry, which began with First Direct (www.firstdirect.com) calling a halt to new mortgage lending.

Halifax (www.halifax.co.uk) will offer its best mortgage deals only to customers who have a deposit worth at least 25% of the house purchase. The minimum deposit for most deals will rise from 3% to 5%.

Borrowers are finding that once expensive ‘standard variable rates’ are now the cheapest option at the end of their fixed-rate deals. With the mortgage market narrowing, these deals represent the sole option for many. Halifax lends one in five of all mortgages in Britain.

Alex Murray, head of mortgages at Thinc Group, perceives these moves as examples of high street lenders protecting their own interests:

‘Don't be surprised next year to see some lenders announce record profit levels, much to the annoyance of the poor consumer’

He continues:

‘Institutions can't lend at less than 6% and the rates available to customers need to reflect the true cost of obtaining funds. I wouldn't be surprised to see 7% as standard.’

Chris Eagle, Commercial Manager at Credit Choices, warns worried mortgage holders not to rack up credit card debts:

‘If your mortgage repayments are threatening to spiral out of control, don’t turn to credit cards as a solution. Choosing this path will only lead you further into the mire. Instead, contact the Citizens Advice Bureau and ask for financial advice. There may be a more rational, long-term solution.’